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Beginner’s guide to Forex trading

People have been trading one currency for another since the beginning
of time. However, the modern foreign exchange or Forex industry started
developing after the Bretton Woods accord in 1971 that allowed national
fiat currencies to float freely and all exchange control was
eliminated. Today, the Forex is a global 24/7 market, where investors
can speculate, hedge, or just exchange currencies for cross-border
investments.

Advent of Internet Democratized Forex Trading

Before the Internet became a household name, Forex trading was an
institutional necessity. Only big banks and institutional investors
participated in the interbank Forex market to buy one currency for
another for export/import of goods and making foreign investments.

However, the proliferation of the Internet opened up the possibility
for almost anyone to trade Forex as a range of Forex brokers started
offering online trading platforms.
Online only Forex brokers soon began offering low initial deposit and
high leverage, that allowed anyone with a few hundred dollars to open a
Forex account and trade large amount currencies. Even if you were
living miles away from major financial hubs like New York or London, and
wondering what is Forex trading and how to profit from it, you could still do it from anywhere as long as you had an Internet connection.
Today, smaller retail investors make up a significant portion of the overall global Forex market.

How You Can Trade Forex

Since Forex is a highly liquid market, the price of most Forex pairs
fluctuates almost every minute. The price of some highly volatile Forex
pairs moves so fast that you can open a trade, and close it with within
few minutes with a significant amount of profit by using substantial
leverage. All you need is a Forex brokerage account and a stable
Internet connection.
For example, in the current Forex industry, a Nigerian Forex trader
can open a live Forex account with a 100:1 leverage by depositing only a
$200 and start trading up to $200,000 with this account, thanks to
leveraged trading.
The obvious way to trade Forex would be speculating currency prices,
where you buy one currency and simultaneously sell another currency. For
example, if you purchased the EUR/USD, if the rate of EURO goes up
against the US Dollar, you stand to gain from the price difference.
Besides price speculation, can also trade Forex to hedge your
investments in stock markets. Furthermore, you can use a method called
“carry trade” by playing the interest rate difference between two
currencies and earn profit from currency swap differences.

Conclusion

Most small retail Forex traders like yourself start trading with
technical analysis, which is the science of reading price charts.
However, if you are serious about learning this business, you should
invest some time understanding how the global economy works. For
example, understanding basic fundamental indicators of an economy like
employment rates, production level, interest rates, and the role of
central bank in regulating inflation, etc. can help you gain the upper
hand.
With time, as you gain more experience as a Forex trader, you will
find that there is more than one way to profit from the Forex market.